SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
_X_ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the year ended: December 31, 1997
___ TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________.
Commission file number: 033-63489
INTEL CORPORATION 401(k) SAVINGS PLAN
(Full title of the Plan)
INTEL CORPORATION
(Name of issuer of the securities held pursuant to the Plan)
2200 MISSION COLLEGE BOULEVARD
SANTA CLARA, CALIFORNIA, 95052-8119
(address of principal executive office)
INTEL CORPORATION 401(K) SAVINGS PLAN
Index to Financial Statements and Exhibit
Item
__________________________________________________________
Report of Ernst & Young LLP, Independent Auditors
Statement of Net Assets Available for Benefits With Fund Information
at December 31, 1997 and 1996
Statement of Changes in Net Assets Available for Benefits
With Fund Information for Year Ended December 31, 1997
Notes to Financial Statements
Signature
Exhibit 23 - Consent of Ernst & Young LLP, Independent Auditors
Financial Statements
Intel Corporation
401(k) Savings Plan
Year ended December 31, 1997
with Report of Independent Auditors
Intel Corporation 401(k) Savings Plan
Financial Statements
Year ended December 31, 1997
Contents
Report of Independent Auditors...............................................1
Audited Financial Statements
Statements of Net Assets Available for Benefits, With Fund Information.......2
Statement of Changes in Net Assets Available for Benefits,
With Fund Information......................................................6
Notes to Financial Statements................................................8
Report of Independent Auditors
The Plan Administrative Committee
Intel Corporation 401(k) Savings Plan
We have audited the accompanying statements of net assets available for
benefits of the Intel Corporation 401(k) Savings Plan as of December 31, 1997
and 1996, and the related statement of changes in net assets available for
benefits for the year ended December 31, 1997. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Intel
Corporation 401(k) Savings Plan at December 31, 1997 and 1996, and the changes
in its net assets available for benefits for the year ended December 31, 1997,
in conformity with generally accepted accounting principles.
The Fund Information in the statements of net assets available for benefits
and the statement of changes in net assets available for benefits is presented
for purposes of additional analysis rather than to present the net assets
available for plan benefits and changes in net assets available for plan
benefits of each fund. The Fund Information has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
ERNST & YOUNG LLP
San Jose, California
May 12, 1998
Intel Corporation 401(k) Savings Plan
Statement of Net Assets Available for Benefits, With Fund Information
December 31, 1997
(In Thousands)
Participant-Directed Fund Information
----------------------------------------------------------------------------------
Fidelity Fidelity
Insti- Scudder Capital Vanguard Fidelity
tutional Fixed & Fidelity Insti- Growth Fidelity Fidelity
Cash Income Income Puritan tutional Income Magellan Contra-
Portfolio Fund Fund Fund Index Fund Portfolio Fund fund
----------------------------------------------------------------------------------
ASSETS
Investments in Master
Trust, at fair value:
Cash and cash equivalents $ 14 $ 5,447 $ - $ - $ - $ - $ - $ -
Shares of registered
investment companies 76,965 - 14,410 17,721 98,196 70,952 61,910 65,834
Loan participations and
corporate bonds, notes,
and certificates - 25,903 - - - - - -
Guaranteed investment
contracts - 4,535 - - - - - -
Equity securities - - - - - - -
Participant loans
receivable - - - - - - - -
---------------------------------------------------------------------------------
76,979 35,885 14,410 17,721 98,196 70,952 61,910 65,834
Employee receivables - - - - - - - -
Interest and dividends
receivable - 211 - - - - - -
Receivable from broker for
securities sold - - - - - - - -
---------------------------------------------------------------------------------
Total assets 76,979 36,096 14,410 17,721 98,196 70,952 61,910 65,834
LIABILITIES
Payable to brokers for
securities purchased - - - - - - - -
Accrued administrative fees - - - - - - - -
---------------------------------------------------------------------------------
Total liabilities - - - - - - - -
Net assets available for
benefits $76,979 $36,096 $14,410 $17,721 $98,196 $70,952 $61,910 $65,834
=================================================================================
See accompanying notes
2
Intel Corporation 401(k) Savings Plan
Statement of Net Assets Available for Benefits,
With Fund Information (continued)
December 31, 1997
(In Thousands)
Participant-Directed Fund Information
-------------------------------------------------------------
American
Fidelity Funds
Low- Fidelity Twentieth Euro-
Price Growth Century Pacific Intel Partici-
Stock Company Ultra Growth Stock pant
Fund Fund Fund Fund Fund Loans Other Total
------------------------------------------------------------------------------
ASSETS
Investments in Master
Trust, at fair value:
Cash and cash equivalents $ - $ - $ - $ - $ 3,574 $ 76 $45 $ 9,156
Shares of registered
investment companies 62,568 47,817 73,420 28,952 - - - 618,745
Loan participations and
corporate bonds, notes,
and certificates - - - - - - - 25,903
Guaranteed investment
contracts - - - - - - - 4,535
Equity securities - - - - 292,782 - - 292,782
Participant loans
receivable - - - - - 5,424 - 5,424
------------------------------------------------------------------------------
62,568 47,817 73,420 28,952 296,356 5,500 45 956,545
Employee receivables - - - - - - 32 32
Interest and dividends
receivable - - - - 13 - 4 228
Receivable from broker for
securities sold - - - - 24 - - 24
------------------------------------------------------------------------------
Total assets 62,568 47,817 73,420 28,952 296,393 5,500 81 956,829
LIABILITIES
Payable to brokers for
securities purchased - - - - 2,172 - - 2,172
Accrued administrative fees - - - - - - 52 52
------------------------------------------------------------------------------
Total liabilities - - - - 2,172 - 52 2,224
Net assets available for
benefits $62,568 $47,817 $73,420 $28,952 $294,221 $5,500 $29 $954,605
==============================================================================
See accompanying notes
3
Intel Corporation 401(k) Savings Plan
Statement of Net Assets Available for Benefits, With Fund Information
December 31, 1996
(In Thousands)
Participant-Directed Fund Information
------------------------------------------------------------------------------------------
Fidelity Fidelity
Insti- Scudder Capital Vanguard Fidelity
tutional Fixed & Fidelity Insti- Growth & Fidelity Fidelity
Cash Income Income Puritan tutional Income Magellan Contra-
Portfolio Fund Fund Fund Index Fund Portfolio Fund fund
------------------------------------------------------------------------------------------
ASSETS
Investments in Master
Trust, at fair value:
Cash and cash equivalents $ - $ 2,524 $ - $ - $ - $ - $ - $ -
Shares of registered
investment companies 89,886 - 11,425 13,297 55,526 46,147 52,719 49,866
Loan participations and
corporate bonds, notes,
and certificates - 23,464 - - - - - -
Guaranteed investment
contracts - 7,227 - - - - - -
Equity securities - - - - - - - -
Participant loans
receivable - - - - - - - -
----------------------------------------------------------------------------------------
89,886 33,215 11,425 13,297 55,526 46,147 52,719 49,866
Employee receivables - - - - - - - -
Interest and dividends
receivable 404 160 - - - - - -
Receivable from broker for
securities sold - - - - 3 4 1 4
----------------------------------------------------------------------------------------
Total assets 90,290 33,375 11,425 13,297 55,529 46,151 52,720 49,870
LIABILITIES
Payable to brokers for
securities purchased - - - - - - - -
----------------------------------------------------------------------------------------
Total liabilities - - - - - - - -
Net assets available for
benefits $90,290 $33,375 $11,425 $13,297 $55,529 $46,151 $52,720 $49,870
========================================================================================
See accompanying notes
4
Intel Corporation 401(k) Savings Plan
Statement of Net Assets Available for Benefits,
With Fund Information (Continued)
December 31, 1996
(In Thousands)
Participant-Directed Fund Information
-----------------------------------------------------------
American
Fidelity Funds
Low- Fidelity Twentieth Euro-
Priced Growth Century Pacific Intel Partici-
Stock Company Ultra Growth Stock pant
Fund Fund Fund Fund Fund Loans Other Total
------------------------------------------------------------------------------
ASSETS
Investments in Master
Trust, at fair value:
Cash and cash equivalents $ - $ - $ - $ - $ 937 $ - $ 306 $ 3,767
Shares of registered 37,726 42,497 60,462 21,558 - - - 481,109
investment companies
Loan participations and
corporate bonds,
notes, and - - - - - - - 23,464
certificates
Guaranteed investment
contracts - - - - - - - 7,227
Equity securities - - - - 198,409 - - 198,409
Participant loans
receivable - - - - - 5,335 - 5,335
------------------------------------------------------------------------------
37,726 42,497 60,462 21,558 199,346 5,335 306 719,311
Employee receivables - - - - - - 2,970 2,970
Interest and dividends
receivable - - 3,629 - 10 - 3 4,206
Receivable from broker for
securities sold 13 4 - 1 - - - 30
------------------------------------------------------------------------------
Total assets 37,739 42,501 64,091 21,559 199,356 5,335 3,279 726,517
LIABILITIES
Payable to brokers for
securities purchased - - - - 178 - - 178
------------------------------------------------------------------------------
Total liabilities - - - - 178 - - 178
Net assets available for
benefits $37,739 $42,501 $64,091 $21,559 $199,178 $5,335 $3,279 $726,339
==============================================================================
See accompanying notes
5
Intel Corporation 401(k) Savings Plan
Statement of Changes in Net Assets Available for Benefits,
With Fund Information
Year ended December 31, 1997
(In Thousands)
Participant-Directed Fund Information
--------------------------------------------------------------------------------------------
Fidelity Fidelity
Insti- Scudder Capital Vanguard Fidelity
tutional Fixed & Fidelity Insti- Growth & Fidelity Fidelity
Cash Income Income Puritan tutional Income Magellan Contra-
Portfolio Fund Fund Fund Index Fund Portfolio Fund fund
--------------------------------------------------------------------------------------------
Additions to net assets
attributed to:
Investment income:
Net realized and
unrealized
appreciation
(depreciation) in fair
value of interest in
Master Trust $ - $ 199 $ 879 $1,710 $20,522 $12,120 $ 9,025 $ 5,829
Interest and dividends 4,267 2,591 909 1,375 1,603 3,107 4,011 6,235
Employee contributions - - - - - - - -
-------------------------------------------------------------------------------------------
Total additions 4,267 2,790 1,788 3,085 22,125 15,227 13,036 12,064
Deductions from net assets
attributed to:
Benefits paid to
participants and
participant withdrawals (24) - - - (1) - - (1)
Administrative fees - - - - - - - -
-------------------------------------------------------------------------------------------
Total deductions (24) - - - (1) - - (1)
Transfer of assets (to) the
Intel Corporation Defined
Benefit Plan (142) (19) - - - - - -
Net transfers between funds (17,460) (50) 1,197 1,339 20,541 9,574 (3,846) 3,899
------------------------------------------------------------------------------------------
Net increase (decrease) (13,311) 2,721 2,985 4,424 42,667 24,801 9,190 15,964
Net assets available for
benefits:
Beginning of year 90,290 33,375 11,425 13,297 55,529 46,151 52,720 49,870
------------------------------------------------------------------------------------------
End of year $76,979 $36,096 $14,410 $17,721 $98,196 $70,952 $61,910 $65,834
==========================================================================================
See accompanying notes
6
Intel Corporation 401(k) Savings Plan
Statement of Changes in Net Assets Available for Benefits,
With Fund Information(continued)
Year ended December 31, 1997
(In Thousands)
Participant-Directed Fund Information
----------------------------------------------------------------
American
Fidelity Funds
Low- Fidelity Twentieth Euro-
Price Growth Century Pacific Intel Partici-
Stock Company Ultra Growth Stock pant
Fund Fund Fund Fund Fund Loans Other Total
---------------------------------------------------------------------------------------
Addition to net assets
attributed to:
Investment income:
Net realized and
unrealized
appreciation
(depreciation) in fair
value of interest in
Master Trust $ 7,806 $ 2,962 $11,864 $ 1,294 $ 2,950 $ - $ - $ 77,160
Interest and dividends 4,164 4,530 1,441 744 524 124 37 35,662
Employee contributions - - - - - - 144,749 144,749
---------------------------------------------------------------------------------------
Total additions 11,970 7,492 13,305 2,038 3,474 124 144,786 257,571
Deductions from net assets
attributed to:
Benefits paid to
participants and
participant withdrawals - (1) - - 2,320 - 26,732 29,025
Administrative fees - - - - - - 94 94
---------------------------------------------------------------------------------------
Total deductions - (1) - - 2,320 - 26,826 29,119
Transfer of assets (to) the
Intel Corporation Defined
Benefit Plan - - - - (25) - - (186)
Net transfers between funds 12,859 (2,177) (3,976) 5,355 93,914 41 (121,210) -
---------------------------------------------------------------------------------------
Net increase (decrease) 24,829 5,316 9,329 7,393 95,043 165 (3,250) 228,266
Net assets available for
benefits:
Beginning of year 37,739 42,501 64,091 21,559 199,178 5,335 3,279 726,339
---------------------------------------------------------------------------------------
End of year $62,568 $47,817 $73,420 $28,952 $294,221 $5,500 $ 29 $954,605
=======================================================================================
See accompanying notes
7
Intel Corporation 401(k) Savings Plan
Notes to Financial Statements
December 31, 1997
1. DESCRIPTION OF THE PLAN
The following description of the Intel Corporation 401(k) Savings Plan (the
Plan) provides only general information. Participants should refer to the plan
document for a more complete description of the Plan's provisions.
GENERAL
The Plan is a defined contribution plan covering all domestic employees of
Intel Corporation (the Company or Intel). Employees are eligible to participate
in the Plan, effective the first day of the calendar quarter following one
month of service. The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA).
CREATION OF THE PLAN
The Intel Corporation Profit Sharing Retirement Plan (the Predecessor Plan),
authorizing discretionary employer contributions, has historically included a
cash or deferred arrangement under Section 401(k) of the Internal Revenue Code
(the Code). Effective January 1, 1996, the Predecessor Plan was divided into
two components for purposes of ERISA: the Intel Corporation Profit Sharing
Retirement Plan and the Intel Corporation 401(k) Savings Plan. The Intel
Corporation 401(k) Savings Plan consists of participants' deferred accounts,
employee accounts, PAYSOP accounts, and rollover accounts. The basic and
discretionary Intel Corporation contribution accounts remain in the Intel
Corporation Profit Sharing Retirement Plan.
CONTRIBUTIONS AND PARTICIPANT ACCOUNTS
Company Contributions
- ---------------------
Prior to 1987, the Company contributed shares of its common stock (PAYSOP
contributions) based on a percentage of each participant's qualified
compensation as defined in the Predecessor Plan. Participants may not transfer
funds from the PAYSOP account to other investment options. Effective
January 1, 1987, the PAYSOP program was amended so that no further
contributions would be made.
8
Intel Corporation 401(k) Savings Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (continued)
CONTRIBUTIONS AND PARTICIPANT ACCOUNTS (continued)
Company Contributions (continued)
- ---------------------------------
PAYSOP contributions (the Company's common stock) are held in a separate fund
by Mellon Bank N.A. (the Trustee). For financial statement purposes, this fund
has been combined with the Intel Stock Fund. The value of the PAYSOP shares in
the Intel Stock Fund as of December 31, 1997 is approximately $65,003,000
(approximately $63,795,000 for 1996). For the year ended December 31, 1997,
PAYSOP investment income was $3,381,000 and benefits paid were $1,827,000.
Participant Contributions
- -------------------------
Participants are allowed to contribute from 1% to 10% (limited to certain
percentages for highly compensated individuals) of their annual compensation on
a before-tax basis (to a maximum amount of $9,500 in 1997). Such contributions
are withheld by the Company from each participant's compensation and deposited
in the appropriate fund in accordance with the participant's directives.
Participants may change their investment elections on a monthly basis.
Participant contributions and the allocation of Company contributions and
forfeitures to each participant in total for the Plan and the Intel
Corporation Profit Sharing Retirement Plan are limited to the lesser of
$30,000 or 25% of a participant's compensation.
Participant Accounts
- --------------------
Separate accounts are maintained for each participant. The account balances
are generally adjusted as follows:
- Monthly for participant contributions.
- Daily for a pro rata share of gains or losses on the Plan's investments
based on the ratio that each participant's account bears to the total of
all such accounts.
9
Intel Corporation 401(k) Savings Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (continued)
VESTING
Participants are immediately 100% vested with respect to contributions to all
accounts in the Plan as well as the related earnings from such contributions.
PAYMENT OF BENEFITS
Participants are eligible for a distribution of Plan benefits upon termination
of service, financial hardship (as defined by the Plan), or death. Upon
termination of service, the normal form of benefit is an annuity. However, a
participant may elect, with spousal consent, to have benefits paid in a single
lump sum. In the event of financial hardship or death, the benefits are
usually paid in a single lump sum.
PARTICIPANT LOANS
All participants are permitted to obtain loans of up to 50% of their combined
vested account balances of the Plan and the Intel Corporation Profit Sharing
Retirement Plan up to a maximum of $50,000. The loan provisions are established
and administered by the Sheltered Employee Retirement Plan (SERP)
Administration Department. Loan accounts are maintained in a separate account
by the Trustee.
The amounts borrowed by the participants are first withdrawn from the vested
value of the Intel Corporation Profit Sharing Retirement Plan accounts until
these funds are exhausted and then withdrawn from the accounts of the Plan.
Repayments of loans are transferred to the participants' accounts in the Plan
and Intel Corporation Profit Sharing Retirement Plan in the ratio in which
such accounts provided funding for the loan.
Loan activity for 1997 included approximately $4,188,000 and $4,147,000 of
loans made to and repayments from the Plan's participants, respectively. The
corresponding amount outstanding at December 31, 1997 has been included in
participant loans receivable.
10
Intel Corporation 401(k) Savings Plan
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accompanying financial statements are prepared on the accrual basis of
accounting.
INVESTMENT VALUATION AND INCOME RECOGNITION
Investments in the Master Trust (see Note 4) are stated at the Plan's
proportionate share of participation in the Master Trust, based upon the fair
market value of Master Trust investments held at year end.
Investments in shares of registered investment companies, cash and cash
equivalents, loan participations, corporate bonds, notes and certificates, and
participant loans receivable are stated at fair value as of the last day of
the year. The fair value for securities traded on a national securities
exchange or over-the-counter market is the last reported sales price as of the
valuation date. The shares of registered investment companies are valued at
quoted market prices that represent the net asset values of shares held by the
Plan at year end. Participant loans receivable are valued at the outstanding
principal balance which approximates fair value.
Investments not traded in an active market are stated at fair value, computed
using pricing models at current rates. Investment income includes the gain
(loss) realized on the sale of securities and unrealized appreciation
(depreciation) in the fair market value of investments held by the Plan, which
is the difference between the fair value of investments at the beginning of the
year and the end of the year.
The Master Trust holds wrapper contracts specifically allocated to the Plan in
order to manage market risks and to alter the return characteristics of
underlying securities to match certain Fixed Income Fund objectives (see Note
5). Wrapper contracts with insurance companies are stated at fair market value
as of the last day of the year and are netted against the fair value of the
related underlying investment.
Investment transactions are recognized as of their trade dates, and collateral
has been obtained and secured against investments whenever deemed necessary.
Interest is accrued monthly; dividends are accrued when declared.
11
Intel Corporation 401(k) Savings Plan
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
INVESTMENT VALUATION AND INCOME RECOGNITION (continued)
Guaranteed investment contracts are entered into with insurance companies.
The contracts, which are unallocated in nature, are valued at contract value,
which approximates fair value, as reported to the Plan by the respective
insurance companies. Contract value represents contributions made under the
contracts plus interest at the contract rates less withdrawals and
administrative expenses. If the funds in the guaranteed investment contracts
are needed for benefit payments prior to contract maturity, they may be
withdrawn without penalty.
PAYMENT OF BENEFITS
Benefits are recorded when paid.
CONTRIBUTIONS
Participant contributions are accrued by the Plan when the deferrals are made
from the participants' salaries.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
12
Intel Corporation 401(k) Savings Plan
Notes to Financial Statements (continued)
3. INVESTMENTS
INVESTMENT OPTIONS
During 1997, participants had the option to direct the investment of their
voluntary contributions to the Plan in increments of 10% among the following
investment funds:
Fidelity Institutional Cash Portfolio
- ------------------------------------- - This mutual fund invests in
high-quality, short-term money market securities of U.S. issuers. The objective
of the fund is to preserve a participant's investment, maintain a stable price,
and provide current income.
Scudder Fixed Income Fund
- ------------------------- - The objective of this fund is to provide
participants with a stable fixed-rate return of investment and protection of
principal from changes in market interest rates. This fund invests in
guaranteed investment contracts with insurance companies and approved financial
institutions and other debt instruments with similar characteristics.
Fidelity Capital & Income Fund
- ------------------------------ - This mutual fund invests primarily in higher
yielding, lower quality debt securities.
Fidelity Puritan Fund
- --------------------- - This mutual fund invests in securities of U.S. and
foreign issuers, including those in emerging markets. The securities include
bonds of any quality, common stocks, and preferred stocks.
Vanguard Institutional Index Fund
- --------------------------------- - This mutual fund seeks to replicate the
overall market performance as measured by the Standard & Poor's 500 Index
(S&P 500 Index). This fund holds the same 500 stocks that are included in the
S&P 500 Index.
Fidelity Growth & Income Portfolio
- ---------------------------------- - This mutual fund invests primarily in
U.S. and foreign stocks, focusing on those that pay current dividends.
Fidelity Magellan Fund
- ---------------------- - This mutual fund invests primarily in common stocks
of small, medium, and large foreign and U.S. companies. Investments are
broadly diversified across many different types and sizes of companies and
industries.
13
Intel Corporation 401(k) Savings Plan
Notes to Financial Statements (continued)
3. INVESTMENTS (continued)
INVESTMENT OPTIONS (continued)
Fidelity Contrafund
- ------------------- - The objective of this mutual fund is to increase the
value of the participant's investment by investing in common stocks that are
currently out of public favor.
Fidelity Low-Priced Stock Fund
- ------------------------------ - This mutual fund invests primarily in
undervalued stocks of smaller, less well-known companies that have potential
for significant growth or stocks of companies that are out of favor with
other investors.
Fidelity Growth Company Fund
- ---------------------------- - This mutual fund invests primarily in stocks
of companies with earnings or revenues that indicate the potential for
above-average growth.
Twentieth Century Ultra Fund
- ---------------------------- - This mutual fund invests primarily in common
stocks of small- and mid-sized companies whose earnings and revenues are
accelerating. Investments are broadly diversified across many different
types and sizes of companies and industries.
American Funds EuroPacific Growth Fund
- -------------------------------------- - This mutual fund invests primarily
in stocks of companies whose principal business activities are outside the
U.S. Usually, at least 65% of the fund's total assets will be invested in
securities of issuers from Europe or the Pacific Basin. The fund can invest
in many types of companies, ranging from large multinational corporations
located in major world markets to smaller companies located in emerging
markets.
Intel Stock Fund
- ---------------- - This fund provides participants the option to have their
voluntary 401(k) contributions invested solely in Intel common stock.
Transactions within this fund qualify as party-in-interest transactions.
14
Intel Corporation 401(k) Savings Plan
Notes to Financial Statements (continued)
3. INVESTMENTS (continued)
GUARANTEED INVESTMENT CONTRACTS
The Plan holds guaranteed investment contracts with insurance companies in
order to provide participants with a stable, fixed-rate return of investment
and protection of principal from changes in market interest rates. As of
December 31, 1997, the Master Trust held guaranteed investment contracts in
the amount of $4,607,000 with insurance companies that have Standard & Poor's
ratings of AA or better at the time of purchase. No more than approximately
$2,741,000 of the guaranteed investment contracts is with any one insurance
company.
As of December 31, 1996, the Master Trust held a guaranteed investment
contract of approximately $3,257,000 with Confederation Life Insurance
Company (Confederation Life). In August 1994, Canadian regulators seized
the assets of Confederation Life due to concerns over the quality of the
investment portfolio. A trustee was appointed until a realization of the
Company's assets was completed. As of August 1994, the Confederation Life
portion of each participant's account had been segregated into a separate
account. The Master Trust made the election for the Scudder Fixed Income Fund
to receive a total recovery of principal and interest estimated to be 119% of
the asset contract value. As of December 31, 1997, there was no significant
remaining Master Trust amount related to this guaranteed investment contract.
4. INTEREST IN THE MASTER TRUST
All of the investments of the Plan are held in the Master Trust which consists
of the assets of the Plan, the Intel Corporation Profit Sharing Retirement
Plan, the Intel Corporation Defined Benefit Pension Plan, the Intel Puerto Rico
Profit Sharing Plan, the Intel Puerto Rico Retirement Savings Plan, and the
Intel Puerto Rico Defined Benefit Pension Plan. Each plan shares in the assets
and earnings of the Master Trust in proportion to its respective interests in
the Master Trust. The Trustee holds all investments of the Master Trust. Assets
within mutual funds are managed by the respective mutual fund managers.
Scudder, Stevens & Clark has discretionary authority for the purchase and
sale of investments in the Fixed Income Fund, subject to the general
investment policies of the Investment Policy Committee of the Plan.
15
Intel Corporation 401(k) Savings Plan
Notes to Financial Statements (continued)
4. INTEREST IN THE MASTER TRUST (continued)
The following is a summary of the assets and liabilities of the Master Trust
and the interest of the Plan in the Master Trust as of December 31:
1997 1996
----------------------------------
(In thousands, except percentages)
Total assets $2,797,183 $1,973,427
Total liabilities $ 2,178 $ 5,095
Increase in net trust assets for the years
then ended $ 826,673 $ 575,277
Ownership percentage of the Plan 34% 36%
5. WRAPPER CONTRACTS
The Master Trust holds wrapper contracts in order to manage market risks and
to alter the return characteristics of underlying securities to match certain
Fixed Income Fund objectives. Wrapper contracts generally change the
investment characteristics of underlying securities (such as corporate debt or
U.S. government securities) to those of guaranteed investment contracts.
Guaranteed investment contracts provide participants with a stable, fixed-rate
return of investment and protection of principal from changes in market
interest rates. The wrapper contracts provide that benefit-responsive
distributions for specific underlying securities may be withdrawn at contract
or face value. Benefit-responsive distributions are generally defined as a
withdrawal because of a participant's retirement, disability, death, or
participant-directed transfers, in accordance with the terms of the Plan. As
of December 31, 1997 and 1996, the Master Trust held wrapper contracts with a
notional amount of $26,444,000 and $24,785,000 with a fair value of
approximately ($113,000) and $30,346, respectively.
6. CONCENTRATION OF CREDIT RISK
The Plan's exposure to a concentration of credit risk is limited by the
diversification of investments across thirteen participant-directed fund
elections. Additionally, the investments within each participant-directed
fund election are further diversified into varied financial markets. The
Plan's exposure to credit risk on the wrapper contracts in the Scudder Fixed
Income Fund is limited to the fair value of the contracts with each
counterparty.
16
Intel Corporation 401(k) Savings Plan
Notes to Financial Statements (continued)
7. DIFFERENCES BETWEEN FINANCIAL STATEMENTS AND THE FORM 5500
The following is a reconciliation of net assets available for benefits per
the statement of net assets available for benefits to the Form 5500 as of
December 31:
1997 1996
--------------------------------
(In Thousands)
Net assets available for benefits per the
financial statements $ 954,605 $ 726,339
Amounts allocated to withdrawing
participants (2,981) (2,748)
--------------------------------
Net assets available for benefits per the
Form 5500 $ 951,624 $ 723,591
================================
Amounts allocated to withdrawing participants are recorded on the Form 5500 for
benefit claims that have been processed and approved for payment prior to
December 31 but not yet paid as of that date.
The following is a reconciliation of benefits paid to participants per the
statement of changes in net assets available for benefits to the Form 5500:
1997
--------------
(In Thousands)
Benefits paid to participants per the
financial statements $ 29,025
Amounts allocated on the Form 5500 to
withdrawn participants at
December 31, 1997 2,981
Amounts allocated on the Form 5500 to
withdrawn participants at
December 31, 1996 (2,748)
--------------
Benefits paid to participants per the
Form 5500 $ 29,258
==============
17
Intel Corporation 401(k) Savings Plan
Notes to Financial Statements (continued)
8. INCOME TAX STATUS
The IRS has informed the Company by a letter, dated September 6, 1994, that
the Predecessor Plan is qualified and the trust established under the
Predecessor Plan is tax exempt under the appropriate sections of the Code.
The Predecessor Plan has been amended to segregate the 401(k) savings
component to a separate plan since receiving the determination letter.
However, the plan administrator and the Plan's tax counsel believe that the
Plan is currently designed and being operated in compliance with the
applicable requirements of the Code.
9. PLAN TERMINATION
The Company has the right under the Plan to terminate the Plan subject to
the provisions of ERISA. In the event of a plan termination, participants
will remain 100% vested in their accounts.
10. YEAR 2000 COMPLIANCE (Unaudited)
The Company has developed a plan to modify its internal information
technology to be ready for the year 2000 and has begun converting critical
data processing systems. The Company plans to have internal applications
relevant to the Plan year 2000 compliant prior to June 30, 1999. The
Company's plan also includes determining whether third-party service providers
have reasonable plans in place to become year 2000 compliant. The Company
requested action plans and implementation schedules that will accommodate year
2000 compliance from the administrator and the Trustee of the Plan. The Company
has been informed that the administrator and the Trustee expect implementation
and testing of action plans to be complete prior to March 31, 1999. The Company
does not expect the year 2000 projects discussed above to have a significant
effect on plan operations.
18
SIGNATURE
The Plan. Pursuant to the requirements of the Securities and Exchange Act of
1934, the Plan Administrator has duly caused this annual report to be signed on
its behalf by the undersigned hereunto duly authorized.
INTEL CORPORATION 401(K) SAVINGS PLAN
(Full Title of the Plan)
Date: June 23, 1998 By: /s/ Andy D. Bryant
----------------------------------
Andy D. Bryant
Vice President and Chief Financial
Officer of Intel Corporation,
Plan Administrator